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KiwiRail Freight Growth Signals Company Is On Track

Media Statement
For immediate release
26th October, 2012

KiwiRail Freight Growth Signals Company Is On Track

KiwiRail has recorded a 25% growth in freight revenue in just two years, Chairman John Spencer said today at KiwiRail’s Annual Public Meeting.

“Despite a year of on-going challenges, and the impact of these on our overall business, I feel confident that the focus of our ten year plan on building a strong foundation for freight growth is working,” he said.

“In the last year group revenue has grown by over seven percent compared to the prior year and the freight business, which constitutes 64% of group revenue, has achieved 15% revenue and 11% volume growth.”

The company and its shareholder, the New Zealand Government, have continued to invest in improving the rail network and the upgrading the equipment needed for both rail and ferry services.

“In the past year half a billion dollars has been spent across a wide array of projects, including the Auckland and Wellington metro rail upgrades. Both of these projects, worth approximately $1.2 billion are now largely complete, on time and on budget,” said Mr Spencer.

“This has resulted in further improvements in on-time performance, while maintaining a ten-year low in mainline derailments.”

“Now that the Aratere has been fully commissioned and performing well, she is contributing to improvements in on-time performance and overall cost savings for Interislander.”
New rolling stock including new locomotives, wagons, intermodal containers, carriages and electric trains in Wellington have also been commissioned over the past year.

“I am particularly pleased with the performance of the new locomotives as they have now completed nearly 20,000 freight trips, travelling over two and a half million kilometres, and are fast becoming the workhorses of our freight fleet,” he said.

“All this work has been done while still maintaining normal operations and it is due to the hard work and dedication of the entire KiwiRail team.”

“In light of this it is disappointing we didn’t achieve our financial targets due to the continued impact of the Christchurch earthquakes on our long distance passenger services and Interislander, and the stagnant global economy.”

To help ensure the company remains on target to achieve financial sustainability, the overall strategy was adjusted to meet these challenges. This included reducing the planned capital expenditure over the next three years, and making the decision to put Hillside Workshops up for sale and mothball the Napier to Gisborne line.

“We took the responsible approach to managing these issues and adjusted our plan accordingly,” said Mr Spencer.

“While we have reprioritised work on the rail network, the investment of $750 million over the next three years is still four times more than that spent from 2005-2008. But this unfortunately led to the hard decision to reduce the Infrastructure and Engineering workforce by 158 staff.”

“The delivery of new rolling stock has led to the type and scope of the work we do at our Workshops being changed. As a result we reduced staff numbers at Hillside and hope to announce a decision on the sale of the site shortly.”

In 2010 KiwiRail announced that it was conducting a review of minor lines that carry low levels of traffic, and therefore don’t cover their costs.

“As a result of this review we recently announced the mothballing of the Napier to Gisborne line as it was losing at least $2.5 million a year and needed significantly more investment in the coming years,” he said.

During the year KiwiRail received approval for a Balance Sheet Restructure which meant that the company is valued on a commercial basis. As a result two entities will be established in early 2013. New Zealand Rail Corporation will be a Public Benefit Entity and will hold the rail corridor land valued at around $3.6 billion. KiwiRail Limited will be a Profit Oriented Entity and will hold the commercial assets.

According to Chief Executive, Jim Quinn, the company has made huge strides in the first two years of the ten year plan.

“Our customers are moving more freight with us and also enabling further growth by building even more rail-sided facilities around the country,” he said.

“They have told us we are improving year on year which we can see in indicators such as on time performance, but they are rightly impatient for more which means our focus is on continuous improvement across our business as we drive to a position of financial sustainability.”

“The outlook for this financial year is promising as group revenue is slightly ahead of budget, but we have to remain focused on cost containment and better ways of operating to ensure we meet our targets and drive as much of the revenue growth as possible to our bottom line.”

Continuous disclosure

KiwiRail’s financial results for the twelve months ended 30 June 2012 have been released in accordance with the company’s continuous disclosure policy - consistent with the Government’s Continuous Disclosure Rules for State Owned Enterprises which came into effect from 1 January 2010.

KiwiRail’s full year accounts were tabled in Parliament on 18th October, 2012.


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